The Maddening Task of Calculating Retirement

Every couple of years I force myself to calculate what my mythical retirement amount might be.

And every couple of years, I emerge from this pursuit looking like Wile E. Coyote, after the Road Runner has run him off a cliff.

The truth: You need at least a ballpark of the target amount you should save.

The reality: You can never be sure that the amount you’ve arrived at is correct.

It’s the great WTF of retirement. Small wonder that 42% of Americans said they picked their number out of a hat, according to the 2011 Retirement Confidence Survey by EBRI.

But guessing won’t cut it. And for all the frustration of my Coyote-Road Runner exercises, having a Big Scary Number dangling over my head has, at least, kept me saving.

Here are some ballpark calculations you can make in two minutes or less. Don’t panic at the enormity of the number: Use it as a goad to spur your savings.

Try an online calculator to give you a rough estimate, like Kiplinger’s.

Use a lifestyle-focused worksheet like RetireMyWay, to gauge what your current savings rate should be.*

Rough it out yourself. Assuming you withdraw 4% of your portfolio (a standard rule of thumb), you would need a $1 million stash to generate $40,000 per year in retirement income, says financial planner David McPherson.

(This doesn’t include Social Security or other benefits. And remember that $40,000 then won’t buy what it does today.)